Gold is up because the government is printing money like mad and has been printing for 15 years, ever since Greenspan directed the Fed to the "Full Employment" approach to monetary policy. Bernanke came out an announced and end to this policy and will target a specific inflation number (presumable 2%). However Bernanke has said that first he will continue to print dollars to bailout the economy, which is ongoing.

IMO this means gold is going to pop at some point because Bernanke will print less than Greenspan. The question is, when the economy picks up with all the bailouts and dollars in circulation, are we going to get even high inflation before Bernanke switches to the Targeted Inflation approach? If the Consumer Price Index rises from the current 4% gold will go up even higher.

I agree that Gold will be a problem but I don't know if bubble is the right word because gold has intrinsic value that previous bubble commodities did not have. There will be people that will make a lot of money, but like all previous bubbles, they were the people that got in on the ground floor (usually because the had information before everyone else) and then started pumping up the hype to get people that knew nothing about the investment in question to take their money and invest.

I think the real problem with gold right now is that like other bubbles you have people that get into gold because they hear the news talk about it, and they see the gold guy on TV so they think gold is where the smart money is.

However few people pay attention enough to know that you may buy gold but you are not physically holding the gold. You are buying certificates that say your gold is in a vault and there are fees involved for holding the gold for you.

A rule of money is that you do not invest in things in which you are not familiar or with people that you don't know or whose trustworthiness is unproven. Many people are buying gold without understanding why it can be valuable, and they are buying from tv commercials saying that gold is a good investment.

I would not be surprised if another crash occurs, when people go to cash out their gold, they find that there is no gold in the vaults, or the holding company goes out of business, or some massive fraud occurred in which people cant get their money back.

Such an event would effect the price of gold as people lost faith in their holdings and started to cash out causing a run on gold.

I know some people also buy gold coins, but the difficulty there is that coins cost a little extra beyond their weight value, and you need to have a safe to put it in, and then you have to hire a midget that hides under a pile of dirty clothes next to the safe, ready to jump out and stab any intruders.

I'm still not sure. Metals seem to have stabilized after a fall, but the central banks likely have more tricks up their sleeve to manipulate.

The stock market does keep pace with inflation. Even if you look at modern industrial countries that have experienced currency collapse/hyperinflation, stock market kept pace and usually beat metals. Personally I'm for a mix of both stocks and metals, I just want to make sure I buy what I buy low.

Reply Post

“This is the official website of the Mixed Martial Arts llc. Commercial
reproduction, distribution or transmission of any part or parts of this website
or any information contained therein by any means whatsoever without the prior
written permission is not permitted.”